The Value Compass Points to Canada

While many travelers cast their eyes to tropical climates in search of the best vacation deals, the deepest values are popping up in America's backyard: Canada.

Our neighbor to the north rarely elicits excited responses from travelers, but this year, thanks in part to heavy discounting and a favorable exchange rate, a Canadian vacation will give you some serious bang for the buck.

"The best deals in North America can be found in Canada," says Edward Hasbrouck, author of The Practical Nomad: How to Travel Around the World. "This is one of the best times I've ever seen to go there in terms of value."

The discounts will be especially impressive in the fall, a traditional off-peak travel period wedged between the summer rush of Canadian vacationers and the winter inflow of skiers and other outdoorsy types. Indeed, some airlines have already taken steps to deal with reduced demand. On Wednesday, Air Canada(ACNAF Quote) slashed 1,300 seasonal jobs on a temporary basis to cut costs during the period of weak demand.

As in the U.S., the Canadian travel market took a rather sizable hit in the wake of Sept. 11. But Canada's travel market isn't such a magnet for international travel, relying more on intra-Canadian tourism than on business from U.S. customers. As a result, Hasbrouck says that many service industries that cater especially to tourists are offering extreme discounts.

"Restaurant meals are going to be a really strong bargain, but hotels will be the best deals," says Hasbrouck, who recently returned from a tour of bed and breakfasts in the Canadian Northwest. "I was staying in high-end places that cost $80 to $90 Canadian. That's just $50 to $60 in U.S. currency, which would have cost between $100 and $150 in a major metropolitan city like New York or San Francisco."

So Canada is Cheap, Eh?

Canada is the second-largest country in the world, but in the minds of travelers, geographic size doesn't mean it has more to offer as a travel destination.

"People think Canada is going to be very similar to America, especially the big cities," says Geoff Silvers, director of e-marketing for Orbitz, an online travel agency. "It has pretty much everything. There are art museums, plenty of activities and historical places and lots of good shopping."

Instead of day-tripping through the hills of Vermont or New York State to see the foliage change colors, consider a three-day trip to Quebec City and Montreal. Both cities have old European charm and are nestled in the Laurentian Mountains, where pristine forests explode into reds and oranges during the first weeks of October.

"The Laurentians will be absolutely wonderful that time of year," says Evelyn Hannon, publisher of JourneyWoman.com, a travel Web site targeting female travelers. "And the fun of going to Montreal is getting a taste of Europe. They speak a lot of French there, but it's also bilngual. And the mountains are just 45 minutes away."

Orbitz.com has some outstanding weekend deals to both Montreal and Quebec City, which include airfare and three nights at high-end hotels.

Round-trip airfare from New York City, plus three nights at the four-star Wyndham Hotel in Montreal, starts at $319, not including tax and fees. Three nights at a four-star hotel in Quebec City, including round-trip airfare from Chicago, starts at $472, not including tax and fees. (In both cases, other destinations will cost more money.)

Those who shun package deals in favor of a la carte selections will find airfare surprisingly reasonable in the fall as well. "Traditionally a good fare from the East Coast to the East Coast of Canada costs between $200 and $250," says Silvers.

So Canada is Really Cheap, Eh?

Flights and accommodations may be reasonable, but the shopping will be downright cheap.

Currently, Canadian dollars trade at a massive discount to the American dollar, a complete reversal from a decade ago, when the currencies were flirting with parity. As of Friday afternoon, one U.S. dollar was worth $1.55 Canadian, giving Americans an awful lot of spending power north of the border, just in time for the holiday shopping season.

Even though Canadian prices are higher, the currency exchange makes them lower than in the U.S. Consider the effect on the price of Microsoft's Xbox video game console, which costs $199 in the States and $299 up north. While the $100 seems insurmountable, an Xbox in Canada costs just $191 in American currency, not including taxes.

While currency rates between the U.S. and Canada have swung mightily over the past half-year, few expect major changes by the time fall rolls around.

"The only major influence on currency rates would be a pickup in the global economy. That would strengthen the Canadian dollar," says Jamie Coleman, foreign exchange analyst for Thomson Financial, who adds that rates have stabilized at the current levels. "Right now, these rates are extremely favorable for American travelers."

One of the best bets for shopping is Toronto, which feels more Americanized than Quebec. On Bloor Street, a popular shopping destination, the streets are lined with ritzy Fifth Avenue staples, while the less posh Hazleton Lanes sports an even mix of Canadian designer shops and art galleries.

The 15% Canadian tax on goods and services might eat into your bargains, but if you save receipts and use a credit card, you'll be able to recoup some of what you spent, while ensuring you'll get the best exchange rate.

"It's not such a bad deal. The Canadian government lets you apply for a refund to recover half of what you spend on taxes," says Silvers. "In relation to taxes that we pay in major American metropolitan cities, that's not so bad."